Claims Conference at Crossroads as Fiery Meeting Looms for Holocaust Group

The annual board meeting of the organization responsible for allocating billions of dollars in Holocaust restitution money is a famously heated affair.

But for Julius Berman, chairman of the Conference on Jewish Material Claims Against Germany, this year’s conference promises to be one of the most contentious; indeed, it may turn out to be one of the most divisive in the group’s 62-year history.

For multiple reasons, Berman’s longtime leadership of the group is on the line. First and foremost, he faces a challenge from critics over his response to a 2001 letter, later proved accurate, warning of a conspiracy involving Claims Conference employees to defraud Holocaust funds.

But that is not the only issue besetting the Claims Conference as its board members fly in to New York for the two-day meeting, which begins on July 9. Like Pandora’s box, the 2001 letter has set loose other questions about the managerial competence of the group’s leadership.

In other developments:

• The Claims Conference has declined to respond to questions about what insurance coverage, if any, it had to offset the $57 million lost from the fraud.

• The former head of a large not-for-profit organization that cares for survivors says he fears that the Claims Conference may open itself up to further fraud as it expands one of its funds into the Former Soviet Union.

• A leading Jewish demographer says Claims Conference data on Holocaust survivors in the Former Soviet Union are inflated.

• An expert in not-for-profit management at Harvard University’s Kennedy School of Government says it is “outrageous” that the Claims Conference refuses to support an independent investigation into its failure to follow up on the early warning it received of the fraud conspiracy.

• The New York State Attorney General’s Office is reviewing the matter, the Forward has learned.

Meanwhile, as the Forward went to press, a war of words continued between board members over how soon — and how much of — an internal investigation of the handling of the 2001 letter, would be made available to the rest of the board.

The Claims Conference did not respond to requests for comment put to it on several of these issues by the Forward. But Sidney Zoltak, a board member representing the Canadian Jewish Congress, said that he, for one, was reserving judgment until the crucial board meeting.

“We don’t want to get out the gallows before the accused is sentenced,” he told the Forward. “Let’s wait for the verdict first.”

Leaders of the Claims Conference no doubt hoped this year’s meeting would be an occasion to finally put the group’s recent troubles behind it. The organization has been reeling since it revealed in 2010 that it was the victim of a fraud facilitated by about a dozen current and former employees. A lengthy investigation by the FBI and the Office of the Manhattan District Attorney revealed a 15-year conspiracy, aided by co-conspirators across North America who helped thousands of people in the Russian-speaking community fraudulently claim at least $57 million in Holocaust funds.

The Claims Conference hoped to find closure on the scandal this past May with the conviction of three people, including a top Claims Conference administrator, for their part in the fraud, after 28 people had previously pleaded guilty to fraud charges.

Instead, the Claims Conference faced deeper controversy when it was revealed during the trial that top Claims Conference officials were alerted to the fraud in 2001 by the anonymous letter but failed to adequately investigate that warning.

Now the organization stands at a crossroads.

The main focus of the upcoming board meeting will be whether Berman manages to keep his post.

Berman, who has led the board for 11 years, was a member of the Claims Conference’s executive and audit committees when the anonymous letter was received in 2001; he became the group’s chairman less than one year later.

Berman oversaw one of two investigations in 2001 that largely confirmed the letter’s allegations, but for some reason no further action appears to have been taken until further evidence came to light, in late 2009.

Berman’s fate will be in the hands of more than 50 board members drawn from Jewish organizations from around the world whose first order of business will be the election of officers. About a half-dozen board members, including Ronald Lauder, president of the World Jewish Congress, and Natan Sharansky, chairman of the Jewish Agency for Israel, have been critical of Berman’s handling of the episode.

The board’s judgment of Berman’s role will be based largely on a report by a four-man committee, appointed by Berman, to look into the matter. That committee in turn has tasked the Claims Conference ombudsman, Shmuel Hollander to investigate the handling of the 2001 letter.

In addition to Berman’s role, Hollander will also have to assess the roles of past Claims Conference officials and the current executive vice president, Greg Schneider, who worked at the Claims Conference in 2001 and was alerted to the letter then.

Christine Letts, an expert in not-for-profit management at the Kennedy School, said the Claims Conference should not rely on its staff ombudsman to investigate such a serious matter.

“The rest of the board seems to be asleep at the switch,” Letts said. “It’s very peculiar to have a person inside the organization that works for all these people to do the report, particularly when it’s the very top leadership implicated.”

Letts added: “It’s got to be an external group for anybody to believe it.”

Letts said board members ought to alert New York State Attorney General Eric Schneiderman to investigate the matter, particularly because executives and board members could be guilty of malfeasance.

It is unknown whether board members have contacted Schneiderman’s office, but a spokeswoman for the attorney general indicated that her boss had been alerted to the situation. “We cannot comment on matters before our office,” said Melissa Grace, the spokeswoman.

Questions have also been raised about whether the Claims Conference had insurance to cover its losses from the fraud.

Bruce Arbit, who runs a firm that helps find claimants in large class action suits, said that it is standard procedure for organizations in the claims administration industry to insure against employee error or fraud. Arbit said his own organization, A.B. Data, maintains around $100 million in so-called errors and omissions insurance and employee dishonesty insurance — a measure that all of his competitors also take.

If the Claims Conference had carried such insurance it would have been able to repay the $57 million to the ultimate victim of the fraud, the German government, which pays for the Holocaust funds that were defrauded. A Claims Conference spokeswoman, Hillary Kessler-Godin, did not respond to multiple requests for information about whether and, if so, how much insurance coverage the Claims Conference carries.

Meanwhile, Elie Rubinstein, a former social services administrator for Holocaust survivors, said he is concerned about the expansion of a Claims Conference program, the Hardship Fund, into the Former Soviet Union.

Rubinstein, the former executive director of The Blue Card, a not-for-profit that looks after destitute Holocaust survivors, fears that the Hardship Fund’s one-off payment of about $3,500, made primarily to those who fled Nazi persecution, will make an attractive target for fraudsters in a region of the world where corruption is rife and $3,500 is a significant sum. He added that there was also confusion about who is eligible.

Following negotiations last year, the German government expanded eligibility rules for the Hardship Fund. In addition to those who fled east during World War II because of the German army’s advance, the fund is now open to Jews who were trapped during the Nazi siege of Leningrad and those who were within 60 miles of the German front.

A Jew who was a fetus at the time his or her mother fled is also eligible, as are the legal heirs of a survivor, if the survivor applied to the fund before they died.

“Even now I am reading some of the websites in Russian, and there is a lot of miscommunication and misunderstanding,” Rubinstein said. “Some people believe that because their parents fled, children are eligible to apply.”

The Claims Conference has implemented many new safeguards since it discovered the fraud. Claims Conference spokeswoman Kessler-Godin said that each Hardship Fund application was being scrutinized rigorously.

Since the program was launched in November 2012, the Claims Conference has received 58,000 applications, Kessler-Godin said. “Each of these applications is being translated, data entered, matched to pre-existing compensation applications, checked for identity, verified that the person was persecuted as a [Jew] and researched at historical archives such as Yad Vashem to document persecution,” Kessler-Godin said.

The Claims Conference estimates that about 20,000 victims of the Nazis will receive payments in 2013, totaling about $67 million.

But some question the group’s expertise in identifying survivors. When the Claims Conference announced last year that it was expanding the Hardship Fund into the Former Soviet Union, the group estimated that about 80,000 survivors might be eligible for the new payment.

Sergio Della Pergola, an Israeli expert on Holocaust survivor demographics, said he doubted that there were 80,000 Holocaust survivors who met the Hardship Fund criteria in the Former Soviet Union. “The only way to make those data credible is that anyone who lived in the Soviet Union [during the war] is eligible, which is a very, very broad criterion,” Della Pergola said.

Kessler-Godin said the Claims Conference based its estimate on the “80,372 Nazi victims who receive Claims Conference-funded services through a network of Hesed, [social service] agencies throughout the FSU.”

The American Jewish Joint Distribution Committee runs the Hesed agencies. But a spokesman for the JDC said that it served just 71,124 Holocaust victims in 2012.

Asked to explain the disparity, Kessler-Godin said the Claims Conference had sent outreach letters about the fund to “any [FSU] Jewish Nazi victim who has received any service over the past several years and is not already receiving a pension.” Some, she suggested, later moved into situations in which they no longer required the social service. Nevertheless, Kessler-Godin said, such people are “still potentially eligible for the Hardship Fund,”.

These and other questions may be raised during the showdown ahead. But if they are, they will be discussed out of earshot of members of the press and public. Berman has denied requests from the Forward and The New York Jewish Week to attend and report on the meeting.

Berman said in a statement: “It is the long-standing policy of the Claims Conference that its meetings of the Board of Directors are not open to the public. As in the past, meetings of the Claims Conference Board of Directors are closed to the public in order that members of the board may feel free to speak openly.”

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Paul Berger has been a staff writer at the Forward since 2011, covering crime and healthcare issues, such as sex abuse, circumcision, and fraud. He is a fluent Russian speaker and has reported from Russia and Ukraine. He also likes digging into
historicalmysteries
.